AEMO plan has coal snuffed out as early as 2040 in power revolution
Coal is set to be extinguished from Australia’s electricity system up to a decade earlier than planned under new modelling laid out by the Australian Energy Market Operator.
Coal is set to be extinguished from Australia’s electricity system up to a decade earlier than planned, exiting three times faster than expected, under a radical blueprint for the power grid that requires a nine-fold increase in wind and solar capacity by 2050 to meet the nation’s net zero emissions targets.
The Australian Energy Market Operator, which runs the national electricity network, has plotted a “step-change” scenario after consultation with industry to guide power grid investment over the next 30 years and ensure Australia hits goals to cut pollution.
Coal, which provides up to 70 per cent of current electricity capacity, could be entirely shut as early as 2040 under the plan. That is up to 10 years earlier than current scheduled retirement dates outlined by their owners. Big coal plants will close their doors ahead of schedule this decade at up to three times the pace than current expectations.
While five gigawatts of coal is currently set to exit by 2030, AEMO predicts that that number could be almost three times higher at 14GW under its modelling. All of Victoria’s brown coal plants would be retired by 2032, compared with plans by AGL Energy to run Loy Yang A until 2048.
“Over the past decade, coal-fired generators have withdrawn from the market before their announced dates, and competitive and operational pressures will intensify with the ever-increasing penetration of cheap renewable generation. All brown coal generation and over two-thirds of black coal generation could withdraw by 2032,” AEMO said in its 2022 draft integrated system plan released on Friday.
Double the amount of electricity will be needed as transport, heating, cooking and industrial processes are electrified, while a nine-fold increase in large-scale wind and solar will have to be built to replace coal in the system. While a third of detached homes in Australia have solar on their rooftops, more than half of homes will own the renewable source by 2032, growing to 65 per cent by 2050. “The step-change scenario forecasts a rapid transformation in Australia’s National Electricity Market, consisting of a significant investment in renewable generation, storage and firming generation as coal plants exit, and improvements to transmission,” AEMO chief executive Daniel Westerman said.
“On a per capita basis, Australia added four to five times more renewables than the European Union, the US or China in 2018-19. The national electricity market now needs to maintain that record rate every year for the decade to triple VRE [variable renewable energy] capacity by 2030 – then almost double it again by 2040, and again by 2050.”
Rampant renewable energy supplies have rapidly eroded the influence of coal in the market and led to a sustained period of low power prices, piling pressure on the profitability of ageing generators. Coal facilities are increasingly having to switch off during daytime hours when high solar supplies undercut them on price.
“The sector is undergoing a more rapid change than has previously been expected. Owners of coal generators have already either brought forward their announced retirements or indicated they would,” AEMO said.
“Their decisions remain necessarily uncertain as they grapple with operating dynamics in the face of cheap renewable generation, their own competitive strategies, plant conditions, regulatory and remediation costs and the wishes of local communities to either close or remain open.”
EnergyAustralia decided to close Yallourn in Victoria four years early, while NSW Energy Minister Matt Kean has said the nation’s coal plants could be tipped out of the electricity market earlier than planned.
Some 45GW of storage across batteries and hydro will be required with 9GW of gas-fired power needed to help firm up renewables.
“The most pressing need in the next decade (beyond what is already committed) is for batteries, hydro or viable alternative storage of up to eight hours’ depth to manage daily variations in the fast-growing solar and wind output,” AEMO said.
Transmission projects will add $29bn in value while allowing renewables to be spread across the grid, with the Victoria NSW Interconnector and HumeLink projects both seen as critical to guard consumers against the risk of faster-than-expected coal retirements.
“Investment confidence will be important to delivering benefits to consumers, as the transition described in all the scenarios will require significant investment,” Mr Westerman said.
Snowy Hydro has previously warned that the lack of transmission could kill the transition to renewables – with a string of major players weighing into the debate – and singled out concerns over infrastructure as a major issue that needs to be confronted by industry, policymakers and energy ministers to ensure supplies can flow to users.
Energy Networks Australia, whose members supply the nation’s 16 million electricity and gas connections, said there were fears that transmission would fail to keep up with the rapid change in the power grid.
Consultation on the draft plan will be open until February 11 and finalised by June 30 next year.
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